SNAP STARTED THE OVERALL SLIDE,
AT LEAST FOR THIS SESSION.
LET’S GET RIGHT TO THE FLOOR
SHOW JOINING ME TOP ANALYST FOR
SOCIAL MEDIA NAMES INCLUDING
SNAP, TWITTER, META, IS EVERCORE
’S MARK MAHANEY WHO LAST
NIGHT DROPPED HIS PRICE TARGET
ON SNAP FROM $47 DOWN TO $36.
HE’S JOINED BY FIDELITY
INVESTMENTS JOHN GAGLIARDI.
MARK, I WANT TO START WITH YOU.
A LOT OF BEING MADE OF THE FACT
THAT JUST FOUR WEEKS AGO SNAP
CEO & COMPANY WERE VERY
OPTIMISTIC AND NOW EVERYTHING
SHIFTED.
CLEARLY, YOU, EVERYBODY ELSE,
TAKEN BY SURPRISE HERE, BUT TALK
TO ME ABOUT HOW AND WHETHER THEY
COULD HAVE SEEN THIS COMING.
>> WELL, LET ME STEP BACK A
LITTLE BIT.
IF I THINK ABOUT WHAT WE’VE
HEARD FROM TECHNOLOGY STOCKS,
YOU KNOW, KIND OF YEAR-TO-DATE
ITS BEEN COST INFLATION.
WE’VE YET TO HEAR REALLY THE
RUMBLINGS OF DEMAND
RECESSION AND WE STARTED TO
POSSIBLY HEAR THAT FROM SOME OF
THE RETAILERS LAST WEEK AND
THAT’S WHAT SNAP SIGNALED LAST
NIGHT WHICH IS THAT AND THEY
GAVE RELATIVELY CAUTIOUS
GUIDANCE, THAT THEY’RE GOING TO
COME IN BELOW THE LOW END OF
WHAT WE THOUGHT WAS CAUTIOUS
GUIDANCE, SO IT LOOKS TO US LIKE
THERE’S A MACRO READ HERE FOR
ALL INTERNET AD NAMES,
ESPECIALLY THOSE WITH EXPOSURE
TO BRAND ADVERTISING, ESPECIALLY
WITH THOSE WITH EXPOSURE TO
EUROPE THERE’S BEEN A BIT OF A
CLIFF-OFF HERE IN TERMS OF
ADVERTISER DEMAND.
WE’RE LOOKING FOR MORE HARD DATA
POINTS BUT UNTIL PROVEN
OTHERWISE THAT MACRO PREED FROM
SNAP IS A DECENT ONE, THEY DO
5 BILLION IN AD REVENUE SO ITS
NOT TINY SO IF THEY’RE SEEING IT
CHANCES ARE OTHER ONES TO MORE
OR LESS DEGREE BUT HERE IS THE
FIRST REAL SIGN WE’VE SEEN
OF AN ADVERTISING RECESSION
KICKING IN.
LIZ: OKAY, BUT, MARK, YOU KNOW,
WE’RE DISTILLING FROM ALL OF
THIS AND YOU’VE CUT YOUR REVENUE
FORECAST BY ABOUT 5% YOU STILL
HAVE YOUR OUTPERFORM ON IT, BUT
QUITE FRANKLY, WE COULD HAVE
LOOKED LAST WEEK AND SEEN
WALMART, TARGET, AND THEN OF
COURSE TODAY, ABERCROMBIE &
FITCH WHICH IS DOWN 30% RIGHT
NOW, YOU COULD HAVE DISTILLED
THAT WHATEVER THE FED HAS DONE
SO FAR, NOT WORKING, RIGHT?
AND SO THIS LEADS ME TO
GAGLIARDI.
WHOSE THE NEXT SNAP, THE ONE
STOCK THAT COMES OUT AND DRAGS
THE REST OF THE SECTOR DOWN?
>> I DON’T KNOW, I WISH I KNEW.
I HONESTLY DO NOT.
I CAN TELL YOU THAT THE SECTORS
ARE SHIFTING AND THIS IS NORMAL
SECTOR ROTATION.
WE SAW THE SELL-OFF IN TECH.
IT STARTED WITH THE LEAST
PROFITABLE TECH AND ITS WINDED
ITS WAY INTO PROFITABLE TECH AND
NOW, IT’S MOVING ALONG INTO
COMMUNICATION SERVICES
ACROSS-THE-BOARD, AND THE
LOGICAL PLACE THAT YOU’D SEE
THE BUSINESS CYCLE GO TO IS
INDUSTRIALS, MATERIALS, AND
ENERGY, BUT ENTER THE FED.
THE FED IS CHANGING THE WHOLE
GAME, AND NOW WE HAVE TO THINK
OF THEM AS THE BIG SELLER IN
TOWN AND THEY ARE THE PERSON
REALLY BETWEEN REVERSE REPOS AND
SELLING BONDS AND RAISING
INTEREST RATES.
THEY’RE REALLY CONTROLLING HOW
THIS GOES, AND DO WE GET THAT
SOFT LANDING?
LIZ: WELL WE GOT THE 10 YEAR
YIELD AT A ONE-MONTH LOW, RIGHT?
THE LAST TIME WE SAW THESE LEVEL
S LAST I CHECKED 2.78, 2.77
RIGHT NOW WE’RE AT 2.76.
CLEARLY A BIT OF A FLIGHT-TO-
QUALITY BUT LET’S GET
BACK TO THIS TECH STORY,
MARK.
THE FACT THAT SNAP IS A COMPANY
THAT, I MEAN, LET’S FACE IT,
PERHAPS YOU AND I AND MAYBE JOHN
AREN’T EXACTLY THEIR KEY DEMO
BUT FOR IT TO BE SUCH A SHOCK
MEANS THAT IT’S MORE THE MESSAGE
THAT THEY HAD SENT, SO WHEN WE
START TO SEE THE SECOND QUARTER
NUMBERS THAT ARE COMING OUT OR
AT LEAST STARTING, YOU KNOW,
DRIBBLE IN WHEN WE BEGIN TO HAVE
THAT OPPORTUNITY TO SEE HOW THEY
WILL DO, WHO ARE YOU MOST
WORRIED ABOUT, OF THE STOCKS
THAT YOU COVER?
>> WELL, I’D LOOK AT NAMES WITH
EXPOSURE TO BRAND ADVERTISING
AND TO EUROPE, AND IN MY MIND,
THAT BE NAMES LIKE TWITTER BE AT
THE TOP OF THAT LIST.
THEIR ADVANTAGE IS THEY HAVE A
BID.
FACEBOOK WOULD HAVE EXPOSURE
THERE.
PROBABLY THE LAST INTERNET
ADVERTISING SAY GLOBAL
ADVERTISING NUMBER THAT BE AT
RISK BE GOOGLE BUT JUST KEEP IN
MIND DURING THE COVID CRUNCH AND
DURING THE 2007-2009 FINANCIAL
CRISIS GOOGLE WAS IMPACTED TOO
SO EVEN THE SAFEST OF INTERNET A
D MODELS CAN BE
NEGATIVELY IMPACTED BUT I’LL
ALSO THROW OUT THREE HEDGES.
IT’S POSSIBLE THAT SNAP IS SEE
ING AN IMPACT FROM TIK TOK,
AND AD DOLLARS SHIFT BACK TO
FACEBOOK, THEY SHIFTED AWAY FROM
FACEBOOK, THEY COULD BE SHIFTING
BACK THIS YEAR AND IT’S POSSIBLE
THAT APPLE IS ENFORCING MORE
PRIVACY SCREENS SO IT’S POSSIBLE
THAT THOSE THREE THINGS ARE
BECOMING MORE SNAP-SPECIFIC THAN
SECTOR-WIDE SPECIFIC SO THAT’S A
LITTLE BIT OF A HEDGE HERE BUT I
THINK THE RIGHT READ FOR NOW
UNTIL PROVEN OTHERWISE IS THAT
WE’RE SEEING A MACRO SLOWDOWN IN
AD SPEND.
LIZ: BUT IF YOU REALLY LOOK AT
IT, JOHN, THIS IS WHAT THE FED
KIND OF WANTED, TO COOL DOWN A
SIZZLING ECONOMY.
THEY MAY NOT GET THEIR DREAM OF
A SOFT LANDING, BUT AS WE
CONTINUE TO LOOK AT EXACTLY WHAT
THEY PLAN TO DO IN JUNE, AND
JULY, YOU NOW START TO HEAR
RAPHAEL BOSTICK, THE
ATLANTA FED PRESIDENT,
SAYING BE REALLY CAREFUL, DON’T
BE WRECKLESS.
I THINK THAT THE FED LOOKS AT
THE STOCK MARKET A BIT TOO MUCH,
AND THAT THEY MAY START TO
WOBBLE, HE MAYBE THE FIRST
THAT’S REALLY STARTING TO WOBBLE
TO SAY WELL, MAYBE WE NEED TO
BACKUP.
IS THAT A MISTAKE, BECAUSE I CAN
TELL YOU, I’M NOT SEEING GET
LESS EXPENSIVE AROUND HERE.
>> WE HAVE TO LOOK FOR THE
GREEN SHOOTS, AND IT’S
SPRINGTIME, WE SHOULD BE LOOKING
TO THE THINGS THAT DO WELL IN
QUANTITATIVE TIGHTENING, AND
THOSE SECTORS SHOULD BE BANKING,
ENERGY, AND CONSUMER DURABLES,
AND I THINK THE MOVE THAT WE SAW
YESTERDAY ACROSS-THE-BOARD IN
FINANCIALS, TO ME, THAT WAS THE
FIRST GLIMMER OF HOPE I’D
SEEN IN A LONG TIME.
LIZ: YEAH, WELL, WE’LL BE
WATCHING ALL OF IT MORE AND
AGAIN, THE MARKETS ARE NOT
DISAPPOINTING WITH VOLATILITY AT
LEAST.
WE DO HAVE THE VIX UP ABOUT 4%
OFF THE HIGHS OF THE SESSION, SO
A LITTLE BIT OF THE TIGHTNESS
COMING OUT OF THE MARKET.
JOHN GAGLIARDI, MARK MAHANEY
ALWAYS A PLEASURE TO HAVE YOU